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Home Jurisdictions Canada

TransCanada Signs Gas Pipeline Contracts Averaging 107 Years [Not Humour]

April 8, 2018
Reading time: 2 minutes

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shannonpatrick17/flickr

 

One or more unidentified natural gas companies have raised eyebrows among fossil analysts by committing to a 107-year contract, four times the normal duration, to ship product from Alberta to Ontario and Quebec on TransCanada Corporation’s Nova Gas pipeline system.

Actually, since TransCanada reported an average contract duration of 107 years in its latest round of customer agreements, the Financial Post says one or more bidders must have bid higher than the average.

The move is being interpreted as an attempt to guarantee the bidder’s access to a pipeline choke point, known as the East Gate, at Empress, Alberta. Since the National Energy Board sets the price for shipping natural gas by pipeline, potential shippers compete based on gas quantity and contract durations.

But that doesn’t mean industry observers are sold on the contract.

“I just don’t understand how you can run your business with a 100-year time horizon,” said Raymond James analyst Jeremy McCrea.

“Who would’ve done that?” asked Ryder McRitchie, vice president of capital markets at Jupiter Resources Inc.

TransCanada spokesperson Shawn Howard said past rounds of bidding produced average contract terms of 28.6 and 22 years. “For the East Gate capacity constraints, these are the longest contracts presently on the system,” he said. “We believe they are the longest ever, but can’t say with absolute certainty.”

It may strain credibility just a bit to imagine that any piece of energy infrastructure in place today will still be operating in the year 2125, or widely competitive against lower-cost renewables and battery storage by 2025. (Or that any system built in 1911 would still be in use today.) But you can banish those doubts, because the always-credible National Energy Board has got you covered.

“Spokesperson Chantal Macleod said that if a pipeline is properly maintained and operated, it can operate indefinitely,” the Post reports.



in Canada, Community Climate Finance, Culture, Oil & Gas, Pipelines / Rail Transport

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